Why the days of Silicon Valley control freaks Musk, Zuckerberg are numbered
Their dictatorial control is no longer working out for them
Mark Zuckerberg and Elon Musk have had weeks they would rather forget, but taken at face value, their current travails appear to have little in common.
Zuckerberg, Facebook chief executive, spent much of last week dealing with the fallout of the company’s past acquisitions.
Kevin Systrom and Mike Krieger, the heads of Instagram, quit amid hidden but growing tensions with Zuckerberg about the photosharing app’s direction. Zuckerberg has been throwing his weight around at Instagram more than usual recently, after leaving it largely independent since he paid $1bn for it six years ago.
Eventually, he pushed Systrom and Krieger too far, and they decided enough was enough.
To make matters worse, WhatsApp’s co-founder Brian Acton twisted the knife shortly after. In an explosive interview, he revealed how relationships between Zuckerberg, Acton and fellow co-founder Jan Koum, who sold WhatsApp for $19bn in 2014, soured over the course of Facebook's ownership until both left.
Both cases seemed to show a clash between Zuckerberg and anybody who dares to disagree with him. Differences between companies and acquirees are nothing new, of course, but rarely do they seem so ideologically driven.
Such spats are especially awkward in a company that claims to be about “connecting people”.
Now we turn to Musk. The saga over the Tesla boss’s doomed attempt to take the company private culminated last week when America’s financial regulator, the Securities and Exchange Commission (SEC), sued Musk for fraud, saying it wanted to bar him from running any public company, including Tesla itself. On Saturday, two days after the SEC lawsuit, Musk settled with the regulator, agreeing to pay a $20m fine and step down as chairperson.
It was hardly the outcome Musk anticipated almost two months ago when he sent the fateful tweet claiming he had “funding secured” for a buyout.
But all things considered, Musk has no right to complain. We now know that funding was far from secured, and the subsequent fraud charges were no laughing matter.
Given the possible punishments – Musk being barred from running Tesla or worse – the outcome will be a relief for investors. Tesla’s chief can easily pay the fine and the other condition – separating the roles of CEO and chairperson – is one of the first rules of good corporate governance. It is only in Silicon Valley where such a separation of powers would be perceived as punishment. But, apparently, it is.
Musk had reportedly rejected a similar settlement with the SEC earlier in the week, before formal charges were brought.
It is unclear what made him change his mind, but if Musk was willing to face being accused of fraud, simply so that his company's board would not have to operate in the tried-and-tested way that much of the corporate world already does, it shows just how warped his priorities had become.
What connects the troubles of Zuckerberg and Musk?
Simple: the two share a desire for almost total control.
Zuckerberg, despite a folksy public persona, is a ruthless tactician, practised at isolating and eliminating potential threats (one of his favourite historical figures is the controversial Roman emperor Augustus).
This has been most apparent in Facebook’s own manoeuvres: the acquisitions of potential competitors such as Instagram and WhatsApp, and the strategic moves that have hampered Twitter and Snapchat.
However, the same tactics play out within Facebook.
Zuckerberg carefully curates a network of allies with unwavering loyalty and promotes them into key positions. Those who do not buy into the mission, as Acton clearly did not, and as Systrom and Krieger may never have done, are edged out.
It is no coincidence that Chris Daniels, the new boss of WhatsApp, and Adam Mosseri, the heir apparent at Instagram, are part of Zuckerberg’s inner circle.
Facebook’s founder has also ensured complete control over the company for years to come through a complicated stock structure that will mean shareholders have no say in how the company is run even when Zuckerberg sells off the majority of his shares. He, too, has refused to countenance an independent chairperson, despite shareholder anger over the matter.
Musk, too, has centralised power. Tesla’s board includes his brother, Kimbal, and some directors have ties to his other venture SpaceX. He has dismissed calls for more independence, once telling an investor group to buy shares in Ford if they didn’t like it. In response to a shareholder motion to appoint an independent chairperson earlier this year, Tesla claimed the company would not have been so successful had it had an independent chairperson.
The problem is, in both Zuckerberg’s and Musk’s cases, their dictatorial control no longer seems to be working out for them.
Facebook is beset by problems (the cyber-attack that allowed hackers to access 50 million accounts, revealed last Friday, is just one). Top-down control is stifling the ideas that could get it out of its current rut, and the exit of the Instagram founders shows just what happens to those who do think differently.
Tesla, meanwhile ... well, it is not hard to see how a more assertive board would have improved things during the recent buy-out debacle.
Figureheads such as Musk and Zuckerberg are lionised in Silicon Valley. Their problems suggest they have let too much of that go to their heads.
– © The Daily Telegraph